Smarter searching for all-weather stocks

At the start of October, the FTSE All-Share fell by nearly 7% in a week. Good companies are still cheaper than they were.

But how best to find them?

October 2018 was a story of fear overcoming greed, with investors haunted by the spectre of a bear market. Very appropriate for Halloween. We have built up a loose body of commentary over the past couple of weeks, when not hiding under the bedsheets. Once the dust settles we can forget how things felt in the heat of the moment, so it’s helpful to have a record showing that, ah, yes, at one point, some of us - maybe - were a tad concerned.

Acknowledging these things, while not flattering to the ego, can better prepare us for the future. It will happen again, after all. Here are some of the articles and comments (from most recent to oldest):

Tuesday 30th October SCVR

Monday 29th October SCVR

Thursday 25th October: How falling markets present tough questions to investors

Thursday 25th October SCVR

Friday 19th October: Stable stock ideas for volatile markets

Anyway, back to identifying those investment opportunities. We need to narrow the field. One method of investing comes to mind.

Blitz, van Vliet, and the low volatility anomaly

  • There is a growing body of academic work that supports the ‘low volatility anomaly

  • It shows that low-volatility stocks tend to have higher returns per unit of risk than higher-volatility stocks

  • This begs the question: are we better off being boring?

There is a method of investing out there that has been used by some of the best fund managers in the world. Its successful application used to require many man-hours and entire teams of investment professionals due to its quantitative nature and the calculations involved. We have set up our own easy-to-use take on it that and, so far, as we see below, it has yielded encouraging results.

I’m talking about the low volatility anomaly. There is a growing body of academic studies that proves it works - here are a few of the more influential articles:

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